Reproduced by express permission form the Commonwealth Government, Australian Financial Security Authority.

June 2004 Edition

What are assets?

Assets or property are anything you own when you become bankrupt or anything
you buy or receive before the end of your bankruptcy. Income you earn during
bankruptcy is not included but will be taken into account in your income
contributions assessment.

More information is available in the pamphlet: Income Contributions

Going bankrupt will affect your assets.

Some assets are exempt, which means you may keep them.

Some assets are non-exempt or divisible, which means your
trustee may sell them for the benefit of your creditors.

What assets may 1 keep?

The Bankruptcy Act sets out a list of exempt or protected assets, for
example:

most ordinary household or personal items, such as clothes,
furniture, kitchen appliances and equipment, a TV, video recorder, stereo,
washing machine, and items mainly for the use of children or students in the
house

There are circumstances where some of these things would be sold, such as
antique furniture, and electrical equipment of significant value.

tools used to earn an income, up to a limit of $2,900
(indexed) - tools over this limit may be sold by your trustee

Indexed means the amount regularly changes in line with the Consumer Price
index or the base pension rate

vehicles (cars or motorbikes) used mainly for transport, up
to a combined limit of $5,800 (indexed). The limit refers to your equity in
the vehicles (the value of the car minus the sum owing under finance)

superannuation and life assurance policies up to the
pension Reasonable Benefit Limit (as worked out under the Income Tax
Assessment Act 1936)

compensation for a personal injury (eg from a car accident
or workers compensation)

assets bought with protected monies

Protected monies are monies that cannot be claimed by a trustee eg
personal compensation money, certain government grants

re-establishment grants to farmers, including grants under
the Rural Adjustment Act 1992 or Farm Household Support Act 1992

property protected under the Defence Service Homes Act 1918

an asset held by you in trust for another person (eg a
childâ€™s bank account).

Awards of a sporting, cultural, military or academic nature made to you, such
as medals or trophies but not cash or jewellery, and claimed as having
sentimental value may be exempted by a vote of creditors.

If you are buying an exempt asset under finance, you will only be able to
keep it if you continue to pay for it.

Warning:

There are penalties if you fail to:

disclose assets on your Statement of Affairs

disclose to your trustee in writing within 14 days any assets you
acquire during bankruptcy.

What assets will my trustee deal with?

Your trustee will sell or distribute your non-exempt (divisible)
assets and any assets that have a value over a specified limit.

Your assets include those you own when you become bankrupt, or any you
acquire or receive before the end of your bankruptcy.

If you have a share in a non-exempt asset, for example a house, your trustee
can sell your share. If the co-owner is not also bankrupt, the trustee may agree
to sell your share to them, but it would have to be for at least as much as the
trustee could get from selling it on the open market.

If an agreement cannot be reached with the other owner, the trustee may apply
to the Court for an order to sell the property.

What does my trustee do with the money obtained from my assets?

Your trusteeâ€™s aim is to pay your creditors and his or her own fees and
expenses plus the government realisations charge.

Your trustee will sell an asset if there will be an expected surplus after
selling costs and expenses and any debts owed to a secured creditor are taken
out.

The balance (surplus) is kept by the trustee for the benefit of your other
creditors.

Payments to creditors are called dividends.

Example:

House property
$190,000

less secured creditors

council/shire rates
4,000

bank mortgage
145,000

less costs of sale

legal costs
1,000

advertising
1,000

agent's commission
6,000

Surplus
$33,000

Trustee fees and expenses plus the government realisations charge will be
paid out of the $33,000 and the balance distributed as dividends to creditors.

Can my creditors take my assets?

Secured creditors who hold a security over an asset may take and sell the
asset if you fall behind in payments. Bankruptcy does not affect the rights of
secured creditors.

Common examples of secured assets are:

a house subject to a mortgage with a bank

a motor vehicle subject to a bill of sale

goods under hire purchase, chattel mortgage, lease or bill
of sale with a finance company

assets with creditors secured by government legislation
over houses and land, such as council/shire rates and water rates.

If you are in doubt about whether one of your creditors is secured, you
should first ask the creditor. If you are still doubtful, ask. a financial
counsellor or your trustee.

A list of financial counsellors and other advisors is
available from AFSA offices (see rear cover) or from AFSAs website
www.afsa.gov.au.

If you wish to keep an exempt asset which is
secured, you will need to keep paying for it or the creditor will take it
back.

A secured creditor cannot take an asset back just because
you are bankrupt.

Your trustee can sell a non-exempt (divisible) asset
if it is of value, even if you are paying it off (eg a house).

In some cases creditors retain ownership of items
you have bought until their debt has been paid in full (eg retention of title,
consignment and commission).

More information is available in the pamphlet Debts and
Creditors: What happens to them if go bankrupt?

More information on trustee fees is available in the
pamphlet: AFSA Statutory Fees & Charges

What about assets I used to own?

Trustees will investigate assets you owned in the 5 years before bankruptcy.
If they find that you have given away or sold assets for less than their true
value, they may recover these assets.

Your trustee may also recover any assets that have been transferred for the
purpose of defrauding your creditors (including assets transferred more than 5
years before bankruptcy).

What happens to my assets when I am discharged from bankruptcy?

Your trustee keeps any non-exempt assets which have not been sold before your
discharge (end of bankruptcy). Your trustee may have been unable to sell your
assets straight away; it may take some years.

In limited circumstances, your trustee has a time limit of 6 years after your
discharge to deal with assets (other than cash). The 6 year limit only applies
to:

assets disclosed in your statement of affairs, and

assets acquired by you during bankruptcy, where you disclosed them in
writing to your trustee within 14 days of you becoming aware of them.

The 6 years do not begin until at least the date of your discharge from
bankruptcy.

Your trustee is able to extend this 6 year time limit by giving you written
notice.

If all your creditors and trustee's fees and expenses have been paid in full,
any remaining assets will be returned to you.